Raoul Pal: The Federal Reserve may be forced to adjust its policy this week to avoid a funding crisis.

According to an article published on the X platform by Raoul Pal, the Federal Reserve may be forced to adjust its policy this week to avoid a funding crisis at the end of the month and year. The current trading situation in cryptocurrencies reflects tight liquidity, while the stock market is temporarily supported by buybacks and earnings chasing, but if the problems are not resolved immediately, there is a risk of a repeat of the 2018/19 situation.

The Federal Reserve has met with banks and the New York Fed to understand why the SRF (Standing Repurchase Facility) is not being fully utilized. Market and Fed concerns are intensifying.

The bigger game now lies in the fact that the Treasury wants to control liquidity through banks, while the Federal Reserve prefers quantitative easing (QE). Liquidity management has become a political game, rather than a simple monetary policy issue.

The market will remain volatile this week until the issue is resolved. A temporary solution may soon be rolled out via buybacks/SRFs, while the ultimate solution, adjusting the eSLR (enhanced supplemental leverage ratio), is becoming increasingly urgent.